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Retail social investment across the world

Building mass participation within social investment can significantly impact communities and individuals. At Big Society Capital, we ultimately want to see millions of people contributing to social change through their own personal finance choices, and thousands of grassroots organisations being able to access the finance they need to support their local communities.

Social Investment is one tool to enable charities and social enterprises that are achieving significant impact in our communities to do more with the most vulnerable people in society. Currently, in the UK a large proportion of social investment is being made by institutional investors – pension funds, foundations, large charities and other financial institutions – as well as High Net Worth individuals. This is due, in part, to how the social investment market has evolved over time, with a large proportion of investment happening through intermediated channels, often via fund structures. In this way, the shape of the market has to an extent reflected the shape of the capital available.

At Big Society Capital, one of our goals is to drive mass participation within the social investment market. We ultimately want to see millions of people contributing to social change through their own personal finance choices, and thousands of grassroots organisations being able to access the finance they need to support their local communities (Big Society Capital Strategy 2014-2017). The benefits of building a more inclusive social investment market are outlined in Triodos Bank’s report for the Social Impact Investment Taskforce, ‘Impact investing for everyone’[1]. These include supporting greater diversity in the market and increasing peoples’ familiarity with the balance between risk, social and financial return.

Building on this, members of the general public have the potential to provide longer term, ‘patient’ capital to charities and social enterprises, which is exactly the type of capital they are struggling to access through existing channels[2]. There are also good reasons why many charities and social enterprises might prefer to look for investment from members of the public, such as the ability to build stronger connections with members of the community, or to raise the profile of their mission with the broader public.

Though currently on a relatively small scale, members of the public are beginning to engage in social saving and investment, and this movement is growing. According to Ethex[3], 55,000 people now have social savings accounts with one of the UK’s social banks. The fastest growth area is in direct investment – with the most significant growth coming from community shares, potentially the most accessible form of direct investment, where 75 new offers raised £36 million in 2015, growth of 29% between 2014 and 2015[4]. Crowdfunding platforms also show significant promise in connecting individuals to social and environmental issues they care about, though the current profile of those that donate or invest through these platforms indicates that they are not yet being widely used by ‘ordinary’ members of the public.[5]

Given the early stage of building mass participation in the UK, we have looked to how other countries have encouraged individuals to support social or environmental causes through their saving or investment choices. Each model is different and has emerged in a unique context. This paper highlights interesting features of each model to stimulate wider debate about how a democratised social investment market could be better supported and enabled in the UK.

[1] Triodos Bank, ‘Impact investing for everyone. A blueprint for retail impact investing’, Report produced for the Social Impact Investment Taskforce, established by the G8, September 2014

[2] In Demand: The changing need for repayable finance in the charity sector, CAF (2014)     

[3] The Ethex Positive Investing Report 2015

[4] The Ethex Positive Investing Report 2015

[5] Understanding Alternative Finance,  The UK Alternative Finance Industry Report, Nesta and University of Cambridge, 2014

Last updated | 
3 March 2016